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Khamisa Beda, A Minor, By and Through Her Guardian Ad Litem, Natalina Kanteiko v. Hartford Casualty Insurance Company

February 27, 2013

KHAMISA BEDA, A MINOR, BY AND THROUGH HER GUARDIAN AD LITEM, NATALINA KANTEIKO;
KURT G. REDLINGER, AN INDIVIDUAL; AND ANNE E. REDLINGER, AN INDIVIDUAL,
PLAINTIFFS,
v.
HARTFORD CASUALTY INSURANCE COMPANY, A NEW JERSEY CORPORATION;
USAA INSURANCE AGENCY, INC., A TEXAS CORPORATION; AND DOES 1 THROUGH 100, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Hon. Roger T. Benitez United States District Judge

ORDER: (1) GRANTING DEFENDANT HARTFORD CASUALTY (2) DENYING PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT [ECF No. 34] INTRODUCTION INSURANCE COMPANY'S MOTION FOR SUMMARY JUDGMENT [ECF No. 23]

A child, Khamisa Beda, nearly drowned in a backyard pool at the home of Kurt and Anne Redlinger. This action for breach of insurance contract and tortious bad faith addresses whether Hartford Casualty Insurance had a duty to defend and indemnify the Redlingers in Beda's personal injury lawsuit. The wrinkle is that Hartford was not the Redlingers' homeowner's insurer. Hartford had issued a business insurance policy tied to the Redlingers' separate, commercial property. The Redlingers contend that because they managed the commercial property out of their home, Hartford was obligated to defend them in an action arising out of an incident that occurred at the home.

Pending before the Court are: (1) Hartford's Motion for Summary Judgment, Or In The Alternative, Partial Summary Judgment (ECF No. 23); and (2) Plaintiffs' Motion For Partial Summary Judgment (ECF No. 34). The Plaintiffs in this action are Kurt and Anne Redlinger, as well as Beda as a judgment creditor pursuant to California Insurance Code § 11580. Having reviewed the parties' submissions and the applicable law, the Court concludes that, under the circumstances, Hartford was not obligated to defend or indemnify the Redlingers in the Beda litigation. Hartford's motion for summary judgment is GRANTED. Plaintiffs' motion is DENIED.

BACKGROUND*fn1

In May 2005, Beda was attending a birthday party for the Redlingers' daughter at the Redlingers' home on Cibola Court in San Diego (the "Cibola Court residence"). She nearly drowned in the swimming pool and suffered severe brain injury.

In May 2006, Beda sued the Redlingers for negligence through her guardian ad litem. (RJN, Ex. B, ECF No. 36-3 ["Beda Complaint"].)*fn2 USAA, the Redlingers' homeowner's insurer, appointed attorney Gregory Konoske to represent the Redlingers in the personal injury action.*fn3 Later, Sun-Pro of California, Inc., the Redlingers' family-owned skin care products business, was added as a doe defendant. (RJN, Ex. C, ECF No. 36-3.) Like the Redlingers, Sun-Pro stood accused ofnegligently maintaining,managing, controlling, and supervising the premises. Nautilus Insurance Company, Sun-Pro's insurer, appointed counsel to defend the company and eventually tendered its policy limits of $1 million to settle the claims against it.

In April 2007, the Redlingers tendered a defense to another insurer, Hartford. Not receiving a response, Konoske followed up with tender letters on May 30 and June 6, 2007.*fn4 Hartford contends that the initial letters were sent to the wrong address and that no tender was received by its liability claim office until June 2007. (Def. MSJ at 3, ECF No. 23-1.)

Hartford had issued a business insurance policy with "Kurt Gregory and Anne Elizabeth Redlinger" as the named insureds. The policy covered the period of July 18, 2004 to July 18, 2005. (Def.'s Ex. C, ECF No. 23-6 ["Policy"].) In the business liability coverage form, the policy states: "We will pay on behalf of the Insured those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' . . . to which this insurance applies. We will have the right and duty to defend the insured against any 'suit' seeking those damages. However, we will have no duty to defend the insured against any 'suit' seeking damages for 'bodily injury' . . . to which this insurance does not apply."

The Redlingers are identified in the declarations as "INDIVIDUAL[S]." In the section defining "Who Is An Insured," the policy clarifies: "If you are designated in the Declarations as: [¶] a. An individual, you and your spouse are insureds, but only with respect to the conduct of a business of which you are the sole owner." The business description is "MULTIPLE OCCUPANCY-OFFICE." The policy also provides an address: "2540 Fletcher Pkwy [¶] El Cajon, California 92020." The parties agree this referred to a commercial office property in El Cajon, California that is owned and managed by the Redlingers. (Def.'s MSJ, at 2, ECF No. 23-1; Pls.' MSJ, at 1. ECF No. 34-1.)

Konoske provided Hartford with the pleadings, deposition transcripts, and other documents, to no avail. Hartford refused the tender in July 2007. The insurer explained in a letter that Beda's complaint contained "no allegations that this incident or the party precipitating the incident had anything to do with the 'conduct of a business.'" It concluded: "[I]f you have any information that The Hartford's position is erroneous or additional materials which should be considered, please forward this to my attention." (Def.'s Ex. H, ECF No. 23-10.)

Konoske sent follow-up letters requesting reconsideration and suggesting a basis for coverage under Hartford's policy. He explained in one letter, for example, that "Mr. and Mrs. Redlinger, from time to time, work from their home doing business for Sun-Pro." (Def.'s Ex. I, ECF No. 23-10.) He offered "evidence" in a subsequent letter, stating that the Redlingers "worked from home," "maintained a home office for Sun Pro," "stored product at their home," "housed a company vehicle at their home," and "frequently gifted product to guests at their home," etc. (Def.'s Ex. K., ECF No. 23-10.) He provided deposition transcripts in which the Redlingers testified as to the nature and extent of Sun-Pro business operations, both at both the home and at the Fletcher Parkway building, where Sun-Pro was a tenant. (Def.'s Ex. O, ECF No. 23-13.)

Hartford's coverage position did not change. It denied re-tender in an August 31, 2007 letter, explaining that it had reviewed the complaint and discovery but saw no indication the birthday party "was in any way related to the conduct of the Redlinger's [sic] business." (Def.'s Ex. L, ECF No. 23-10.) It elaborated in a March 2008 letter that the "business" insured by its policy was the Redlingers' "multiple occupancy-office," and the fact that the Redlingers' other business, SunPro, did work at the Redlingers' home was "not relevant to the question of who The Hartford insured." Hartford's letter again concluded:

This analysis is based on the information that has been made available to us. The Hartford wants those parties claiming to be insured to receive all benefits to which they may be entitled to under The Hartford policies of insurance. Therefore, if you have any information that The Hartford's position is erroneous or additional materials which should be considered, please forward this to my attention. (Def.'s Ex. P, ECF No. 23-13.) It is undisputed that no one provided additional information or materials to Hartford in response to its March 2008 letter, prior to the filing of the present lawsuit.

In January 2009, the Redlingers and Beda proceeded to a one-day binding arbitration to resolve the underlying dispute. Beda agreed not to execute against the Redlingers' personal assets in exchange for an excess judgment lien in future coverage litigation against Hartford. (Def.'s Ex. R, ECF No. 23-14.) The arbitrator concluded that "the standard of care for inviting eight year olds to a pool party was not met, in that there was no adult supervision present at the time of the incident." He awarded Beda $9,880,330.*fn5 (Def.'s Ex. S, ECF No. 23-14.)

This lawsuit followed. Plaintiffs filed suit in San Diego County Superior Court, but USAA, a former defendant, removed the case here in June 2011. (ECF No. 1.) USAA was later dismissed, and Plaintiffs amended the claims against Hartford. (ECF No. 19.) The First Amended Complaint ("FAC") asserts causes of action for breach of contract, declaratory relief, and breach of implied covenant of good faith and fair dealing for, among other ...


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